Something nobody has mentioned yet - if your income is below certain thresholds, you might qualify for QBI even without meeting the safe harbor! For 2025 filing, the phase-out begins at $182,100 for single filers or $364,200 for married filing jointly. Below those thresholds, the IRS tends to be less stringent about the exact nature of the "trade or business" requirement for rental properties. My CPA advised that with good documentation and business-like treatment of the property (separate accounts, proper record-keeping), a single rental property has a strong case for QBI qualification if you're under those income limits.

Based on your situation, you have a decent chance of qualifying for the QBI deduction, especially since your rental income appears to be well below the income thresholds mentioned by Giovanni. Here are a few key points for your specific case: 1. **Documentation is crucial**: Start requesting detailed activity logs from your property management company. Even if they don't currently track hours, most can provide estimates for time spent on tenant placement, maintenance coordination, inspections, etc. 2. **Business treatment matters**: Since you're using a professional management company and treating this as a business operation, you're already on the right track. Make sure you have separate bank accounts and maintain good records. 3. **Don't overlook your own time**: While the management company handles day-to-day operations, any time you spend reviewing their reports, making decisions about repairs, researching the rental market, or meeting with your accountant about the property can count toward qualifying activities. 4. **Consider the facts and circumstances test**: Even if you can't document 250 hours, your situation (professional management, business bank accounts, profit motive) suggests you're operating a trade or business rather than just holding an investment property. Given that you're earning $2,350/month in rent, the QBI deduction could save you several hundred to over a thousand dollars depending on your tax bracket. Definitely worth pursuing with proper documentation!

Quick question about all this - I'm just a dog walker who files Schedule C. My tax software is showing an option for "paying myself" - should I just ignore that completely and stick to owner draws?

This situation is unfortunately more common than it should be. I've seen several cases where tax preparers set up sole proprietors with payroll systems, often because they're using generic business software that assumes corporate structures. The $275 fee is definitely a red flag - proper business tax preparation requires understanding entity structures, and competent preparers charge appropriately for that expertise. Your instincts are absolutely correct here. Beyond the immediate tax issues others have mentioned, there's also a compliance nightmare brewing. If your client is running payroll, they're likely supposed to be filing quarterly 941 forms, making federal tax deposits, potentially dealing with state payroll requirements, etc. All of this creates unnecessary administrative burden and potential penalties for a structure that shouldn't exist. I'd strongly recommend your client consult with a qualified tax professional (CPA or EA) to clean this up. They'll need to decide whether to amend previous returns or just correct going forward, depending on the amounts involved and audit risk tolerance. The sooner this gets fixed, the better - especially before any IRS correspondence arrives. Your recommendation about either taking proper draws or electing S-Corp status is spot-on. The client needs to pick a lane and do it correctly.

Went through literally the EXACT same thing last year! We thought we filed through H&R Block but never submitted. Found out when applying for a car loan. We ended up going to a local CPA who charged us $275 to e-file our prior year return. Had it done in 2 days and got confirmation really quick. Mortgage companies usually just need proof you filed, not that everything is fully processed. Ask your mortgage broker exactly what they need to see - sometimes just the filing confirmation is enough to keep the loan moving.

I'm a tax preparer and see this situation fairly often. Dylan, you're absolutely right to be concerned about timing, but there are a few things that can work in your favor here. First, since you already completed everything in TurboTax, you have all your documentation organized. A tax professional can take that information and e-file your 2021 return immediately - we're not restricted by the same e-file dates that consumer software has for prior year returns. For a straightforward return like yours (sounds like W-2 income), you should expect to pay $200-350 for the service. Yes, it's more expensive than doing it yourself, but given your mortgage timeline, it's probably worth it. Here's what I'd recommend: Find a local CPA or enrolled agent (not a chain like H&R Block) who can e-file immediately. Ask them to provide you with a copy of the filed return and the e-file confirmation. Your mortgage lender will likely accept this as proof of filing while they wait for IRS processing. The penalties aren't as scary as they seem - you're looking at roughly 5% of your tax owed per month for failure to file (capped at 25%), plus 0.5% per month for failure to pay, plus interest. On $1,800, that's probably around $400-500 in total penalties and interest for being 3+ years late. Get this handled this week if possible. Your mortgage situation is salvageable, but time is definitely of the essence here.

make sure to check your WMR too sometimes it updates b4 transcripts

Congrats on finally getting your 846! That's such a relief after waiting since May 2024. The timeline definitely makes sense - your amended return was completed on 1/16 and now you have a DDD of 2/14, which is pretty typical processing time. You should definitely see that $4,872 hit your account on or around 2/14. The fact that it went from processing to 846 so quickly after completion is a really good sign. Hang in there, you're almost at the finish line! 🎉

Question about crypto tax reporting software - has anyone used TaxBit, CoinTracker, or Koinly for situations like this? I'm dealing with something similar from 2022 trades but have about 300+ transactions. Not looking forward to entering all that manually.

This is exactly why crypto tax situations can be so confusing! The IRS automated systems just see the gross transaction amounts from exchanges without the context of your actual cost basis. It's really common for people to get these notices even when they had losses. I'm glad to see from your update that everything got resolved! For anyone else dealing with similar issues, the key is having good documentation of your actual transactions showing the purchase prices, sale prices, and dates. The 1099 forms from exchanges often don't tell the complete story. One thing I learned from my own crypto tax issues is that it's worth reporting losses even if you think you don't need to - they can actually be beneficial for offsetting other gains or reducing ordinary income up to $3,000 per year. Plus it prevents these kinds of automated notices from the IRS in the first place.